VAT grouping: establishment, eligibility and registration call for evidence – Law Society response

We responded to an HM Treasury call for evidence examining how VAT grouping provisions operate in the UK and potential changes to them.

The proposals

This call for evidence seeks to gather the views of businesses that utilise VAT grouping provisions, and other interested parties, on how these provisions affect them and the wider business community.

Our view

Our response provides information and views about how the current VAT grouping rules operate and how potential changes might affect UK businesses that utilise VAT grouping.

The response covers each of the three distinct areas of VAT grouping examined in the call for evidence:

  • the VAT establishment provisions
  • compulsory VAT grouping
  • grouping eligibility criteria for businesses currently not in legislation, including limited partnerships

Our response explores some of the potential consequences of change for businesses, including financial services businesses, investment funds, as well as certain financing arrangements and outsourcing arrangements.

In conclusion, we do not favour a move to compulsory VAT grouping, as this would significantly reduce business flexibility; nor do we favour elective VAT grouping but on an “all or nothing” basis involving all members within the relevant control group.

We also question whether it is necessary or appropriate to revisit the VAT grouping treatment of limited partnerships and their general partners as part of a package of measures covered in the call for evidence. We ask whether it would not make more sense to consider such issues as part of the wider review of the indirect tax regime for fund management in the UK.

What this means for solicitors

Any changes to VAT grouping may impact on a range of businesses and arrangements of interest and relevance to solicitors as advisers, including financial services and investment funds.

Next steps

Responses to the call for evidence will be used to inform future policy direction.

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